Cuba opens door to more foreign investors with attractive tax schemes
National Assembly is expected to approve new investment plan at a special session
Cuba’s National Assembly is expected at a special session on Saturday to approve a new law that will pave the way for private foreign investment “in all sectors” – with the exception of education and health – as the government seeks ways to help bring money to the island’s fledging economy.
On Wednesday, Cuba’s official news media described some of the components of the new law, which will also provide personal income tax exemptions and “plenty of legal protection and security” to outside investors.
Investment properties “cannot be expropriated except for public use or social interest reasons,” according to one report. But if this occurs, the investor will receive full compensation.
This latest proposal is another spoke in President Raúl Castro’s attempt to transform Cuba’s traditional Soviet-style economy and make state institutions more efficient. In April 2011, the National Assembly passed a wide range of social and economic reforms, including lifting many restrictions that prevented Cubans from traveling abroad.
Currently, there is some foreign investment in the island, but it is mostly centered on the tourist industry.
Havana wants to attract more foreign capital to Cuba with the hope of bringing new technologies while at the same time opening the door for the island to compete in global markets and tap new financing sources, which could eventually lead to job creation and ease Havana’s reliance on food imports, official media said.
The Communist Party daily, Juventud Rebelde, reported that all foreign investment proposals will have to be considered by the government, and will be made through joint ventures, international associations or firms that are completely foreign owned.
Each type of investment will be limited to certain sectors. For example, international associations will be able to invest in renewable energies, hotel management, service and construction industries, and the agriculture sector.
The law also establishes a special tax rate, which will exempt foreign investors who are partners in a joint venture or international economic associations from paying personal income taxes.
Companies will have to follow the local labor codes, including ensuring that all employees are Cubans or have a permanent residence permit. Hired workers must be approved by the Foreign Trade Institute (Mincex) and the Labor and Social Security Ministry. Workers’ salaries will be paid in local currency with the exception of managers and members of boards of directors, Juventud Rebelde said.